CFA Practice Question

There are 120 practice questions for this study session.

CFA Practice Question

Which statement(s) is (are) correct?

I. The accounts receivable period is always greater than or equal to the length of the cash cycle.
II. Reducing the inventory turnover will increase the cash cycle and lower the cash balance.
A. I and II
B. II only
C. I only
Explanation: The accounts receivable period can be shorter than the cash cycle.

User Contributed Comments 2

User Comment
sheenalim the accounts receivable period can be shorter than the cash cycle or it's always shorter than the cash cycle?
leftcoast sheenalim - if you paid your payables the day your inventory is sold, your cash cycle is essentially your receivable period, therefore they would be the same. So the receivable period is always less than or equal to the cash cycle.
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